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MURABAHAH AND IJARAH

AS

amira suhana

Transcript

Accounting for Islamic Financial Products

  • MUHAMMAD HAZIQ HAIKAL BIN DIN @SULONG (048894)
  • ATIKAH SOLEHAH BINTI MALIKI (049126)
  • AMIRA SUHANA BINTI ZAKARIA (048374)
  • WAN NURUL ANIS BINTI SAKRI (048916)
  • WAN KAIRULNISA SYAHIRA BINTI WAN MOHD KHALID (048967)

Topic

CONCEPT

MURABAHAH

MURABAHAH

  • Murabahah contract is a sale of goods at cost plus agreed (profit) mark up.
  • Murabahah comes from the Arabic word 'rabaha' which means 'profit'.
  • Murabahah is defined as a particular kind of sale, compliant with shari'ah
  • Murabahah is not a loan based on interest, it is a sale of commodity for immediate or deffered payment.

THE PRINCIPLES OF MURABAHAH

  • Cost of capital should be disclosed.
  • The activities should be usury free.
  • The activities should be transparent to both parties.
  • Advance payment or deposit is allowed.

IJARAH

IJARAH

  • Ijarah means to give something on rent or providing services and goods temporarily for a wage.
  • Ijarah comes from the Arabic word 'ajara' which means 'renting'.
  • Ijarah is defined as ownership of the right to the benefit of using an asset for a certain period of time in return for a consideration.

THE PRINCIPLES OF IJARAH

  • Offer and acceptance.
  • Two parties: the bank as lessor (the owner of the leased asset) and the customer as the lessee (the party who obtains the right of the leased asset).
  • The object of the Ijarah contract, which includes the rental amount and the service (transferred to the lessee).

TYPES OF MURABAHAH

Topic

ORDINARY MURABAHAH

  • Sale of goods at cost plus agreed mark up.
  • Only two parties involved: the seller and the buyer

ORDINARY MURABAHAH

STAGES INVOLVED IN MURABAHAH

MURABAHAH TO THE PURCHASE ORDERER

  • Murabahah to the purchase orderer (MPO) is a form of murabahah in which the potential buyer (purchaser orderer) instructs the seller (usually an Islamic bank, a financier) to purchase a given asset/commodity according to pre-defined specifications.
  • Involves three parties which is the purchase orderer (customer), the purchaser (bank) and the seller.
  • Two way to pay deposit in murabahah to the purchase orderer - Hamish Jiddiah and Urboun.

MURABAHAH TO THE PURCHASE ORDERER

HAMISH JIDDIAH

Hamish Jiddiah

  • Amount of money which is paid to the seller in a murabahah transaction upon the request of the purchase orderer in order to make sure that the orderer is serious to purchase it once it is available with the seller.
  • Viewed as a security deposit apart from the indication of goodwill and cooperation from the customer side.

URBOUN

Urboun

  • Urboun is an amount of money paid in advance to the bank and the customer concludes the deal and takes the asset, the urboun will be treated as part of the price paid in advance, otherwise urboun will be retained by the bank.

STAGES INVOLVED IN MURABAHAH TO THE PURCHASE ORDERER

BAI' BITHAMAN AJIL

BAI' BITHAMAN AJIL

  • Means sale with deferred payment of the price.
  • BBA is an Islamic banking concept used in the financing of purchase or purchase of insurance. Under this concept, banks provide financing for customers to acquire property or services by buying customer-owned assets or from 'vendors' for cash and then reselling those assets to customers at an additional purchase price.

DIFFERENCE BETWEEN MURABAHAH AND BBA

Topic

TAWARRUQ

TAWARRUQ

  • Tawarruq is a financial instrument in which a buyer purchases a commodity from a seller on a deferred payment basis, and the buyer sells the same commodity to a third party on a spot payment basis (meaning that payment is made on the spot).

STAGES INVOLVED IN TAWARRUQ

JOURNAL ENTRIES FOR TAWARRUQ

LATE PAYMENT CHARGES

1- GHARAMAH

  • not allowed to be recognized as income and it must be channeled to specified charitable bodies.

2- TA'WIDH (Compesation)

  • may be imposed on late financial obligation arising from exchange contracts (such as buy and sell and lease and qard)
  • recognized as income on the basis that it is imposed on the customers as compesation for the actual loss incurred by islamic bank

IBRA' (Discount)

is a term used in Islamic banking and finance literature which denotes the granting of rebate by Islamic banks, at their discretion, to their customers who settle their debt obligations arising from sale-based contracts prior to the agreed settlement period.

TYPES OF IJARAH

Topic

OPERATING IJARAH

OPERATING IJARAH

  • operating ijarah, which doesn't include a promise to transfer the legal title of the leased asset into the lessee at the end of the lease

STAGES INVOLVED IN AN OPERATING IJARAH

IJARAH MUNTAHIAH BITAMLEEK

IJARAH MUNTAHIAH BITTAMLEEK

  • The lessee owns the leased asset at the end of the lease period under the Ijarah Muntahiah Bittamleek.
  • This lease contract does not contain any promise to buy or sell the asset, but the bank may offer a (verbal) unilateral promise of transfer of ownership at the end of maturity period or offer the customer to purchase the asset for a specified price.

TYPES OF IJARAH MUNTAHIAH BITTAMLEEK

  • GIFT AT THE END OF THE IJARAH PERIOD
  • TOKEN PRICE
  • EQUIVALENT PRICE
  • SALE THROUGH GRADUAL TRANSFER OF TITTLE

STAGES INVOLVED IN IJARAH MUNTAHIAH BITTAMLEEK

AL-IJARAH THUMMA AL-BAY'

AL-IJARAH THUMMA AL-BAY'

  • The alternative to the conventional hire purchase.
  • It can be defined as owning the benefit of certain assets for a specific period of time, by paying an agreed sum of rental, with an agreement that the owner will transfer the rented asset to the hirer at the end of the agreed (or during the) period, provided all rental payments or installments have been made in entirety.

STAGES INVOLVED IN IJARAH THUMMA AL-BAY'

ACCOUNTING FOR MURABAHAH BASED ON AAOIFI'S FAS 2 AND FAS 20

Topic

JOURNAL ENTRIES

JOURNAL ENTRIES

STATEMENT OF FINANCIAL POSITION

STATEMENT FINANCIAL POSITION

ACCOUNTING FOR IJARAH BASED ON AAOIFI'S FAS 8

Topic

JOURNAL ENTRIES

JOURNAL ENTRIES

STATEMENT OF FINANCIAL POSITION

STATEMENT FINANCIAL POSITION

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